Revisiting the Relation between Environmental Performance and Environmental Disclosure: An Empirical Analysis

41 Pages Posted: 4 Jan 2006

See all articles by Yue Li

Yue Li

University of Toronto - Joseph Rotman School of Management

Peter Clarkson

University of Queensland - Business School; Simon Fraser University (SFU) - Beedie School of Business; Financial Research Network (FIRN)

Gordon D. Richardson

University of Toronto - Rotman School of Management

Florin P. Vasvari

London Business School

Multiple version iconThere are 2 versions of this paper

Date Written: April 5, 2006

Abstract

Previous empirical evidence provided mixed results on the relationship between corporate environmental performance and environmental disclosures. We revisit this relation by testing economics based theories of voluntary disclosure using a more rigorous research design. In particular, we improve on the prior literature by focusing on purely voluntary environmental disclosures and by developing two reliable environmental performance measures using actual toxic emissions and waste management data. We also develop a content analysis index based on the Global Reporting Initiative sustainability reporting guidelines to assess the extent of discretionary disclosures in environmental and social responsibility reports. This index better captures firm disclosures related to its commitment to protect the environment than the indices employed by prior studies. Using a sample of 191 firms from the five most polluting industries in the U.S., we find a positive association between environmental performance and the extent of discretionary environmental disclosures. The result is consistent with the predictions of the economics based voluntary disclosure theory.

Keywords: discretionary environmental disclosures, environmental performance, voluntary disclosure theory, pollution propensity, content analysis, global reporting initiative

Suggested Citation

Li, Yue and Clarkson, Peter and Richardson, Gordon D. and Vasvari, Florin P., Revisiting the Relation between Environmental Performance and Environmental Disclosure: An Empirical Analysis (April 5, 2006). CAAA 2006 Annual Conference Paper, Rotman School of Management Working Paper No. 07-07, Available at SSRN: https://ssrn.com/abstract=873630 or http://dx.doi.org/10.2139/ssrn.873630

Yue Li

University of Toronto - Joseph Rotman School of Management ( email )

Joseph Rotman School of Management
105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-978-0857 (Phone)
416-971-3048 (Fax)

Peter Clarkson

University of Queensland - Business School ( email )

Brisbane, Queensland 4072
Australia

Simon Fraser University (SFU) - Beedie School of Business ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Gordon D. Richardson

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
416-946-8601 (Phone)
416-971-3048 (Fax)

Florin P. Vasvari (Contact Author)

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

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